Switching Banks

stevewelker 13.07.2020

A Consumer Proposal or Assignment in Bankruptcy represents a fresh start. In most cases, this requires a fresh start with a new bank as well. In our experience we have found that the administrative pain is well worth the effort to protect your income and prevent your monthly budget from being sorely disrupted.

After you file you’ll need to avoid:

  1. Withdrawals from your account by any of your unsecured creditors; and
  2. Your current bank applying their right of offset and seizing funds in your account or that you may soon receive.

This usually involves:

  1. Opening a new account with a bank that you do not owe any money to; and
  2. Either:
    1. Closing your old account if it is not currently overdrawn. (Most banks won’t allow you to close an overdrawn account); or
    2. Asking your bank to stop any scheduled debt payments from your current bank account. Banks usually charge a nominal stop payment fee.
  3. Providing your new bank account information to:
    1. Your Employer;
    2. The Government (Service Canada, Canada Revenue Agency, etc.);
    3. Your auto financing company;
    4. Your auto, home, and/or life insurance company;
    5. Your landlord or mortgage company; and
    6. Anyone else that should continue to deposit into or withdraw from your new bank account.

You do not need to tell your new or current bank why you are switching accounts.

You do not require a large deposit to open a new account. In fact most banks do not require any deposit at all.

If you hold any unregistered investments at your current bank such as Tax Free Savings (TFSA), Educational Savings (RESPs), or other unregistered investments we strongly recommend moving those accounts from your old to your new bank before filing your Consumer Proposal or Bankruptcy.

Registered investments such as RRSPs, RRIFs, LIFs, and pensions do not need to urgently be transferred as they are exempt from seizure. However, individuals often find it most convenient to have all of their banking and investment relationships with the same institution and eventually choose to transfer their investments from their old bank to their new bank. Please note that registered investments should be transferred directly from one institution to the other and not withdrawn to avoid any income tax consequences. If you hold registered investments we suggest discussing your options with your new bank.

If you have any questions, don’t hesitate to contact our office at (416) 246-7771 or by email.